Fixed-rate mortgages soared to their highest averages in a year this week, with average rates on both 30- and 15-year home loans jumping by more than two-tenths of a percentage point.
Average interest rates on 30-year fixed-rate mortgages spiked to 3.81 percent this week, according to the weekly Freddie Mac rate survey, up from 3.59 percent previously. Rates on 15-year fixed-rate loans posted an almost identical increase, rising to 2.98 percent, up from 2.77 percent a week before.
One year ago this week, interest rates on the two loan types were averaging 3.75 percent and 2.97 percent, respectively.
By contrast, average initial rates on adjustable-rate mortgages (ARMs) were barely changed this week. Initial rates on 5-year Treasury-indexed ARMs were up to 2.66 percent, compared to 2.63 percent last week.
Will Fed pare back stimulus?
The jump in fixed-mortgage rates followed rising yields on government bonds amid speculation that the Federal Reserve will soon start scaling back its efforts to boost the economy by promoting lower interest rates, according to Frank Nothaft, Freddie Mac chief economist.
"Improving economic data may have encouraged those views," Nothaft said. "For instance, the Conference Board reported that confidence among consumers rose in May to its highest level since February 2008. Meanwhile, the S&P/Case-Shiller 20-city composite index for March rose to its highest reading since November 2008 (seasonally adjusted)."
This week's increase was the biggest one-week jump in the average for 30-year fixed-rate mortgages since the week of February 10, 2011, when average rates rose to 5.05 percent, up from 4.81 percent the previous week.